Quick Facts

Jordan’s economic freedom score is 69.3, making its economy the 38th freest in the 2015 Index. Its score is essentially unchanged from last year, with a change of 0.1 point reflecting improvements in the management of government spending and labor freedom that are largely counterbalanced by declines in business freedom, monetary freedom, and freedom from corruption. Jordan is ranked 5th out of 15 countries in the Middle East/North Africa region, and its overall score continues to be well above the world and regional averages.

Steady improvement in economic freedom in the early half of the past decade has tapered off in recent years. Over the past five years, Jordan’s economic freedom has advanced by just 0.4 point, primarily due to a deteriorating regulatory environment and an increased level of perceived corruption that offset gains in the control of government spending and property rights.

Despite challenges, economic freedom in Jordan continues its gradual advance, and the economy has moved closer to the “mostly free” category. Jordan is relatively open to global investment and trade. Property rights are generally respected, but improvements are needed to combat corruption and reinforce the judiciary’s independence.

Background

Jordan is a constitutional monarchy with relatively few natural resources. Foreign loans, international aid, and remittances from expatriate workers support the economy. In 2011, King Abdullah responded to “Arab Spring” demonstrations by dismissing his cabinet and ceding greater authority to the judiciary and parliament. The government also implemented two economic relief packages and a supplementary budget to subsidize the middle class and the poor. In 2000, Jordan joined the World Trade Organization and signed a free trade agreement with the United States; in 2001, it signed an association agreement with the European Union. Jordan negotiated a $2.1 billion standby arrangement with the International Monetary Fund in 2012 to finance its budgetary and balance-of-payments deficits. The presence of more than 600,000 Syrian refugees causes serious administrative and resource problems.

As in most Middle-Eastern states, wasta (the use of family, business, and other personal connections to advance one’s interests) is endemic in Jordan. Officials are sometimes influenced in government procurement processes and in dispute settlement. Anti-corruption efforts have yielded mixed results. Property rights are respected for the most part. The judiciary is generally independent, but the king is the ultimate authority.

The top individual and corporate income tax rates are 14 percent. Other taxes include a value-added tax and a property tax. The overall tax burden is equal to 15.3 percent of domestic production. Public expenditures are equivalent to 31.2 percent of gross domestic product, and public debt corresponds to about 88 percent of domestic output.

Incorporating a business takes seven procedures, and no minimum capital is required, but completing licensing requirements takes about two months. The labor market remains rigid, and the public sector employs much of the labor force. The government, facing budget deficits, plans to eliminate electricity subsidies by 2017 and has increased prices for fuel, but it has increased agricultural subsidies.

Jordan has a 5.2 percent average tariff rate. Imports of agricultural products may be subject to licensing requirements. The Jordan Investment Board reviews new investments. Despite a challenging economic environment and ongoing uncertainty stemming from regional security turmoil, banking remains resilient and well capitalized. There are 26 banks in operation, and the capital market continues to develop.